The Downside of the Upload

Why the subway deal would hurt Toronto and the region

This week, a group of 37 civic leaders released an open letter to Mayor John Tory and City Council members, urging them to stand up against the provincial upload of Toronto’s subways. The letter warns of the City’s loss of transit efficiency, planning power and future financial investment potential with the deal.

At this point, the City and Province have signed Terms of Reference for how to negotiate a subway upload agreement, and proponents of the upload maintain that this would be a good thing for Toronto. Advocates for the upload point out that Toronto lacks the capacity to pay for transit expansion and maintenance. They say, unlike the City, the Province can borrow plenty, and ownership of valuable subway assets improves Ontario’s financial picture with respect to debt. In other words, just hand over the subways, Toronto; the Province will pay for everything and you can operate it, and keep the fare box too.

“Let’s make a deal”

In a cash-strapped city with crush-load transit, this deal might seem too good to be true. But a skeptic would wonder how a provincial government set on cutting spending and paying down its deficit would be so keen to run up more debt.

There are deeper cracks in the upload logic. First, there is no guarantee that the province will prioritize transit expansion in Toronto—the Ontario government has signalled that subway expansion outside the 416 is central to the upload plan. Second, the building and maintenance that the Province will assume is for subways only, which means Toronto will still be on its own to improve, expand and repair streetcar and bus infrastructure and service.

The deal could have long-term negative consequences for transit expansion in the region, not just Toronto. Transit planners know that subways don’t make sense in a large part of the region where densities are low, whereas LRTs and bus rapid transit and regional express rail (i.e. upgraded GO) do. But it’s unclear if these non-subway regional projects will be funded by the Province, or left off the priority list indefinitely.

Some ask, even if Toronto runs the tab for its own surface transit, wouldn’t offloading the costs of subways still be a benefit to Toronto? It might be, if the deal stopped there. But by now, most analysts have figured out that the upload of the subway tracks and trains would also include the real estate assets associated with them: the stations, land and air rights. Selling these to developers would pay for the Province’s priority transit lines, namely the Yonge North extension, the Scarborough extension, and possibly the Relief Line (a prerequisite to the Yonge North extension).

Asset harvesting is not sustainable

This short-term fire-sale approach to financing public transit is not sustainable. Not only does it fail to address the larger transit investment needs beyond near term subway priorities, it could mean Toronto’s permanent loss of important public land assets.

Mayor Tory’s Housing Now plan, recently approved by council, proposes leveraging Toronto’s public land to build desperately needed affordable housing, with much of the land in the plan connected to transit stations. Pro-uploaders claim that disposal of the TTC subway and its land could include provisions for affordable housing, but how many units are we talking about? Surely to raise the budget of $16 billion (the combined sticker price for the three priority subways) would require building a lot of market condos on top of those stations.

In Ryerson CBI’s recent report on solutions for affordable housing in Toronto, we stress the importance of never selling public land in exchange for building some affordable housing. Other jurisdictions demonstrate how greater benefits are secured with either long-term leases or joint developments between public agencies and developers (private or not-for-profit) that include sharing in revenues and profits from condo sales, rents and leases, which in turn can be reinvested in more affordable housing, services, public realm improvements and better transit.

The uploading of Toronto’s subway and related assets could quash these opportunities for Toronto for good.

Assuming the value of these assets pays for the three subways, then what? Surely these three subway projects are not the extent of the province’s vision for transit expansion in the region. Once Toronto’s real estate assets are sold for a one-time cash influx, will this mean looking for more furniture to burn to heat the house, like another Hearn Generating Station, Ontario Place, Waterfront, or more debt financing?

Remember revenue tools?

We likely wouldn’t be having this subway tug-of-war today if our leaders had had the courage to introduce revenue tools in previous and current administrations. During the early 2010s, transit advocates called on the provincial government to do the right thing and introduce dedicated taxes, fees or levies to build regional transit. We missed many opportunities to do what sensible governments do to deliver rapid transit, which is to introduce revenue tools, for example a dedicated fuel tax in Montreal, Vancouver and recommended by the Anne Golden transit panel or a dedicated sales tax introduced in the States of Pennsylvania and Utah, and the regions of Denver and Los Angeles.

Because our political leaders lacked the courage to implement revenue tools, the campaign for revenue tools fizzled, despite this being the only proven method of funding long-term transit expansion. Only John Tory was brave enough to advance his road toll proposal, which was rejected by the Ontario Liberals. Fast-forward to today, when we find ourselves debating unsustainable asset harvesting, something more detrimental than a .05% sales tax.

Starving the city

Regarding this week’s open letter, Richard Florida is quoted as follows: “The proposed subway upload is an attack on Toronto and threatens to prioritize suburban expansion over expanded ridership in one of North America’s most gridlocked cities. A great city like Toronto needs to be able to govern itself, not have one of its key assets taken over by a Province that is hostile to its needs.”

In Baltimore, where state control of the city’s transit has led to similar neglect, a consortium of regional leaders now are working to put control of transit back into the hands of the local government, along with more funding. Their rationale: The State’s interests are not those of the city’s. Recently, scarce MTA transit funds were used by the State government bail-out ski resorts instead of fixing transit.

These are alarming precedents demonstrate the impact of harvesting assets or revenue from the city to subsidize investment in the region. It’s very likely the monetization from Toronto’s subways, which have been heavily paid for by Toronto taxpayers and commuters for decades, will be spread around the region while starving the centre.

A strong Toronto means a strong region

Unlike NYC’s recession and urban decay in the late ‘60s and early ‘70s, Toronto’s economy is booming, with corporate head offices and the lion’s share of the region’s employment flocking to the downtown core along with young talent. This is not the time to dismantle and destabilize Toronto’s highly integrated transit system. In fact, the reason the TTC wins awards for the best transit system in North America is its effective integration of subways and surface transit. Taking this apart will harm the system, thereby hampering our growing economic centre.

Of course, proponents of the upload use the underfunded, overcrowded system and negative experience of Toronto’s transit commuters to justify their strategy. But Toronto is one of the least subsidized transit systems in North America. What the TTC needs is funding, not dismantling.

While regional transit investment is essential, it cannot come at expense of the local. Most transit trips are local. Regional governments should support Toronto; as the primary engine of growth for the region and the province, what happens to Toronto matters to everyone.